Cost of living crisis: What energy prices does the EU want to cap?

The European Union is nearing a consensus about the way to deal with the hovering electrical energy payments which might be placing households and corporations beneath insufferable pressure.

The most recent proposal from Brussels suggests the bloc might introduce a worth cap on so-called inframarginal turbines.

What does this imply?

The EU's liberalised electrical energy market relies on the order of advantage, also referred to as marginal pricing.

Underneath this method, all electrical energy producers – from wind and photo voltaic to fossil fuels – promote energy in line with their manufacturing prices and funding wants. The bidding begins from the most cost effective sources – the renewables – and finishes with the most costly ones – on this case, fuel.

Since most EU nations nonetheless depend on fuel to satisfy all their energy calls for, the ultimate worth of electrical energy is inevitably set by fuel, even when inexperienced sources additionally contribute to the overall combine.

With Russia's invasion of Ukraine disrupting vitality provides and scorching summer time temperatures growing demand for cooling, the function performed by fuel in price-setting has grow to be outsized, pushing payments to unpredictable ranges.

On the identical time, it has introduced extra revenues for inframarginal turbines: the non-gas energy crops, together with renewables, nuclear and lignite, that promote electrical energy on the excessive market worth regardless of having considerably decrease manufacturing prices.

That is precisely the place the newest EU proposal comes into play: a worth cap on inframarginal turbines that might partially seize these additional revenues and switch them into additional funds for governments.

Member states would then be obliged to make use of the cash to assist customers, and probably corporations, beneath monetary stress.

However the measure, which many capitals already assist, will not be with out dangers.

What the video above to study extra concerning the EU cap on inframarginal costs.